Liquid Culture

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Clothing E-commerce Site Business Plan

Financial Plan

The following is the financial plan for Liquid Culture.

7.1 Break-even Analysis

Our break-even analysis is based on running costs, the costs we incur to keep the business running, not on theoretical fixed costs that would be relevant only if we were closing. Fixed costs include payroll, rent, utilities, and marketing costs.

Break-even Analysis
Monthly Revenue Break-even $177,248
Assumptions:
Average Percent Variable Cost 58%
Estimated Monthly Fixed Cost $75,228

7.2 Projected Profit and Loss

The following table and chart are the projected profit and loss for three years.

 

Pro Forma Profit and Loss
Year 1 Year 2 Year 3
Sales $2,170,000 $3,000,000 $4,300,000
Direct Cost of Sales $1,249,000 $1,800,000 $2,580,000
Other Production Expenses $0 $0 $0
Total Cost of Sales $1,249,000 $1,800,000 $2,580,000
Gross Margin $921,000 $1,200,000 $1,720,000
Gross Margin % 42.44% 40.00% 40.00%
Expenses
Payroll $531,600 $575,000 $614,000
Sales and Marketing and Other Expenses $265,000 $340,000 $440,000
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $2,400 $2,400 $2,400
Insurance $0 $0 $0
Rent $24,000 $24,000 $24,000
Payroll Taxes $79,740 $86,250 $92,100
Other $0 $0 $0
Total Operating Expenses $902,740 $1,027,650 $1,172,500
Profit Before Interest and Taxes $18,260 $172,350 $547,500
EBITDA $18,260 $172,350 $547,500
Interest Expense $17,574 $13,281 $8,801
Taxes Incurred $206 $47,721 $161,610
Net Profit $481 $111,349 $377,089
Net Profit/Sales 0.02% 3.71% 8.77%

7.3 Projected Cash Flow

The following table and chart are the projected cash flow for three years.

Pro Forma Cash Flow
Year 1 Year 2 Year 3
Cash Received
Cash from Operations
Cash Sales $2,170,000 $3,000,000 $4,300,000
Subtotal Cash from Operations $2,170,000 $3,000,000 $4,300,000
Additional Cash Received
Sales Tax, VAT, HST/GST Received $0 $0 $0
New Current Borrowing $0 $0 $0
New Other Liabilities (interest-free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
Sales of Long-term Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $2,170,000 $3,000,000 $4,300,000
Expenditures Year 1 Year 2 Year 3
Expenditures from Operations
Cash Spending $531,600 $575,000 $614,000
Bill Payments $1,590,840 $2,541,460 $3,387,998
Subtotal Spent on Operations $2,122,440 $3,116,460 $4,001,998
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
Principal Repayment of Current Borrowing $0 $0 $0
Other Liabilities Principal Repayment $0 $0 $0
Long-term Liabilities Principal Repayment $44,796 $44,796 $44,796
Purchase Other Current Assets $0 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $2,167,236 $3,161,256 $4,046,794
Net Cash Flow $2,764 ($161,256) $253,206
Cash Balance $404,264 $243,008 $496,214

7.4 Projected Balance Sheet

The following is the projected balance sheet for three years.

Pro Forma Balance Sheet
Year 1 Year 2 Year 3
Assets
Current Assets
Cash $404,264 $243,008 $496,214
Inventory $264,000 $380,464 $545,332
Other Current Assets $0 $0 $0
Total Current Assets $668,264 $623,473 $1,041,546
Long-term Assets
Long-term Assets $0 $0 $0
Accumulated Depreciation $0 $0 $0
Total Long-term Assets $0 $0 $0
Total Assets $668,264 $623,473 $1,041,546
Liabilities and Capital Year 1 Year 2 Year 3
Current Liabilities
Accounts Payable $311,080 $199,736 $285,516
Current Borrowing $0 $0 $0
Other Current Liabilities $0 $0 $0
Subtotal Current Liabilities $311,080 $199,736 $285,516
Long-term Liabilities $155,204 $110,408 $65,612
Total Liabilities $466,284 $310,144 $351,128
Paid-in Capital $260,000 $260,000 $260,000
Retained Earnings ($58,500) ($58,019) $53,329
Earnings $481 $111,349 $377,089
Total Capital $201,981 $313,329 $690,418
Total Liabilities and Capital $668,264 $623,473 $1,041,546
Net Worth $201,981 $313,329 $690,418

7.5 Business Ratios

The following table shows the projected businesses ratios. We expect to maintain healthy ratios for profitability, risk, and return. These ratios have been determined by the 5137 industry, Women's and Children's Clothing, as found in the Standard Industry Code (SIC) Index.

Ratio Analysis
Year 1 Year 2 Year 3 Industry Profile
Sales Growth 0.00% 38.25% 43.33% 10.40%
Percent of Total Assets
Inventory 39.51% 61.02% 52.36% 34.10%
Other Current Assets 0.00% 0.00% 0.00% 25.70%
Total Current Assets 100.00% 100.00% 100.00% 89.40%
Long-term Assets 0.00% 0.00% 0.00% 10.60%
Total Assets 100.00% 100.00% 100.00% 100.00%
Current Liabilities 46.55% 32.04% 27.41% 40.70%
Long-term Liabilities 23.22% 17.71% 6.30% 9.00%
Total Liabilities 69.78% 49.74% 33.71% 49.70%
Net Worth 30.22% 50.26% 66.29% 50.30%
Percent of Sales
Sales 100.00% 100.00% 100.00% 100.00%
Gross Margin 42.44% 40.00% 40.00% 24.80%
Selling, General & Administrative Expenses 42.42% 36.29% 31.23% 14.80%
Advertising Expenses 11.29% 10.00% 9.30% 0.90%
Profit Before Interest and Taxes 0.84% 5.75% 12.73% 2.00%
Main Ratios
Current 2.15 3.12 3.65 2.36
Quick 1.30 1.22 1.74 1.09
Total Debt to Total Assets 69.78% 49.74% 33.71% 49.70%
Pre-tax Return on Net Worth 0.34% 50.77% 78.03% 4.90%
Pre-tax Return on Assets 0.10% 25.51% 51.72% 9.70%
Additional Ratios Year 1 Year 2 Year 3
Net Profit Margin 0.02% 3.71% 8.77% n.a
Return on Equity 0.24% 35.54% 54.62% n.a
Activity Ratios
Inventory Turnover 10.91 5.59 5.57 n.a
Accounts Payable Turnover 6.11 12.17 12.17 n.a
Payment Days 27 38 25 n.a
Total Asset Turnover 3.25 4.81 4.13 n.a
Debt Ratios
Debt to Net Worth 2.31 0.99 0.51 n.a
Current Liab. to Liab. 0.67 0.64 0.81 n.a
Liquidity Ratios
Net Working Capital $357,185 $423,737 $756,030 n.a
Interest Coverage 1.04 12.98 62.21 n.a
Additional Ratios
Assets to Sales 0.31 0.21 0.24 n.a
Current Debt/Total Assets 47% 32% 27% n.a
Acid Test 1.30 1.22 1.74 n.a
Sales/Net Worth 10.74 9.57 6.23 n.a
Dividend Payout 0.00 0.00 0.00 n.a